Banks enjoy profits bonanza as rates rise
BUMPER profits at banks have increased the likelihood of a windfall tax on lenders.
Barclays became the latest to unveil thirdquarter results, posting a £2bn profit as it was boosted by rising interest rates and red-hot activity among its trading clients.
But chief executive CS Venkatakrishnan – known as Venkat – warned Chancellor Jeremy Hunt that higher levies on banks could hammer the UK’s competitiveness.
‘London has been a global financial centre for centuries and we want it to be a global financial centre for centuries ahead,’ said the 56-year-old.
‘It has all the capabilities – the infrastructure, the excellent financial supervision.
‘An important part of that is a predictable tax regime.
‘These are the ingredients that go into making it – and it’s important that these ingredients are present.’
At Santander UK, profits hit £496m. Standard Chartered, which is listed in London but makes most of its money in Asia, raked in £1.2bn. European lenders, which are also in governments’ crosshairs over a windfall tax, were in the money too.
Deutsche Bank reported one of its strongest quarterly performances since before the financial crisis, and UBS, Unicredit and Santander’s Spanish parent Banco Santander also beat expectations.
Lenders have been helped by rising interest rates, which mean they can charge borrowers more while not raising savings rates by as much, netting profit on the difference.
In Barclays’ UK division alone, this socalled net interest income hit £4.3bn in the third quarter – up 10pc on last year.
Lenders with an investment bank, such as Barclays, have also been boosted by market volatility as their clients trade more frequently. Barclays’ division, which trades bonds, currencies and commodities, saw income jump 93pc to £1.5bn.
This helped balance out a decline in investment banking fees, made from dealmaking, as the wave of mergers and acquisitions that swept the world last year dies down. But the bank’s performance was weighed down by a £327m fine issued by US regulators over a trading blunder in 2018.
Barclays and its rivals have also been forced to set aside more cash to prepare for loans turning sour, as households and businesses struggle through the economic downturn. Barclays tucked away £381m in the third quarter, though Venkat said there were no signs of stress in the loan book.
Families were being sensible, he added, remortgaging early to lock in lower rates and cutting down spending on non-essentials such as clothes. Santander has also set aside £138m for this purpose.
Shares in Barclays slipped 0.3pc, or 0.4p, to 149.82p and Standard Chartered slumped 5.1pc, or 28.4p, to 526p.
John Moore, senior investment manager at investment group RBC Brewin Dolphin, said: ‘There is a caution to [Barclays’] statement and little in the way of news in terms of returns for shareholders – perhaps in response to the recently mooted prospect of a windfall tax on banks.’